If a monopolist's marginal revenue is less than zero over a range of output, then what must price elasticity of demand be?
A) equal to one
B) equal to zero
C) less than one but greater than zero
D) greater than one

Question

Quizplus · Accepted Answer

If the monopolist's marginal revenue is less than zero over a range of output, this means that the monopolist would experience a decrease in total revenue if they were to increase their output. This is generally due to a decrease in the price that occurs when the monopolist increases production. This, in turn, means that the demand for the product is price elastic, meaning that a change in price results in a relatively larger change in quantity demanded. Therefore, the price elasticity of demand must be less than one but greater than zero.

If a Monopolist's Marginal Revenue Is Less Than Zero Over